IMF board approves Policy on Non-Toleration of Arrears to Official Creditors

The Board of Directors of the International Monetary Fund (IMF) has approved reforming the fund's Policy on Non-Toleration of Arrears to Official Creditors, the IMF said in a press release.

Nearly all directors endorsed the revision to the policy on non-toleration of arrears to official bilateral creditors at a meeting on December 8, 2015.

According to the document, in circumstances where an adequately representative agreement has not been reached through the Paris Club, the Fund would consider lending into arrears owed to an official bilateral creditor only in circumscribed circumstances where all the following criteria are satisfied: prompt financial support from the Fund is considered essential, and the member is pursuing appropriate policies; the debtor is making good faith efforts to reach agreement with the creditor on a contribution consistent with the parameters of the Fund-supported program—i.e., that the absence of an agreement is due to the unwillingness of the creditor to provide such a contribution; and the decision to provide financing despite the arrears would not have an undue negative effect on the fund’s ability to mobilize official financing packages in future cases.

An official bilateral creditor may choose to consent to Fund financing notwithstanding arrears owed to it. In such cases, the Board would not need to make a judgment as to whether the three criteria above are satisfied. The Fund would nevertheless continue to encourage the parties to come to an agreement during the program, since the regularization of arrears is an objective of any Fund-supported program and important for the functioning of the international financial system at large.

There may be emergency situations, such as in the aftermath of a natural disaster, where the extraordinary demands on the affected government are such that there is insufficient time for the debtor to undertake good faith efforts to reach agreement with its creditors. When a judgment has been made that such exceptional circumstances exist, the fund may provide financing under the Rapid Credit Facility (RCF) or the Rapid Financing Instrument (RFI).

This policy have entered into effect immediately and will apply to all future purchases or disbursements (including under existing arrangements), with respect to existing and future arrears.